SINGLE AUDIT OF THE
STATE OF ILLINOIS
FOR THE FISCAL YEAR ENDED
JUNE 30, 2005

March 2007

A-77-07-00009

MANAGEMENT ADVISORY REPORT

Mission

By conducting independent and objective audits, evaluations and investigations,
we inspire public confidence in the integrity and security of SSA's programs
and operations and protect them against fraud, waste and abuse. We provide timely,
useful and reliable information and advice to Administration officials, Congress
and the public.

Authority

The Inspector General Act created independent audit and investigative units,
called the Office of Inspector General (OIG). The mission of the OIG, as spelled
out in the Act, is to:

Conduct and supervise independent and objective audits and investigations
relating to agency programs and operations.
Promote economy, effectiveness, and efficiency within the agency.
Prevent and detect fraud, waste, and abuse in agency programs and operations.
Review and make recommendations regarding existing and proposed legislation
and regulations relating to agency programs and operations.
Keep the agency head and the Congress fully and currently informed of problems
in agency programs and operations.

To ensure objectivity, the IG Act empowers the IG with:

Independence to determine what reviews to perform.
Access to all information necessary for the reviews.
Authority to publish findings and recommendations based on the reviews.

Vision

We strive for continual improvement in SSA's programs, operations and management
by proactively seeking new ways to prevent and deter fraud, waste and abuse.
We commit to integrity and excellence by supporting an environment that provides
a valuable public service while encouraging employee development and retention
and fostering diversity and innovation.

MEMORANDUM

Date: March 23, 2007

To: Candace Skurnik
Director Audit Management and Liaison Staff

From: Inspector General

Subject: Management Advisory Report: Single Audit of the State of Illinois
for the Fiscal Year Ended June 30, 2005 (A-77-07-00009)

This report presents the Social Security Administration's (SSA) portion of
the single audit of the State of Illinois for the Fiscal Year ended June 30,
2005. Our objective was to report internal control weaknesses, noncompliance
issues, and unallowable costs identified in the single audit to SSA for resolution
action.

KPMG LLP performed the audit. The Department of Health and Human Services (HHS)
desk review concluded that the audit met Federal requirements. In reporting
the results of the single audit, we relied entirely on the internal control
and compliance work performed by KPMG LLP and the reviews performed by HHS.
We conducted our review in accordance with the Quality Standards for Inspections
issued by the President's Council on Integrity and Efficiency.

For single audit purposes, the Office of Management and Budget assigns Federal
programs a Catalog of Federal Domestic Assistance (CFDA) number. SSA's Disability
Insurance (DI) and Supplemental Security Income (SSI) programs are identified
by CFDA number 96. SSA is responsible for resolving single audit findings reported
under this CFDA number.

The Illinois Disability Determination Services (DDS) performs disability determinations
under SSA's DI and SSI programs in accordance with Federal regulations. The
DDS is reimbursed for 100 percent of allowable costs. The Department of Human
Services (DHS) is the Illinois DDS' parent agency.

The single audit reported that DHS did not follow the Illinois Procurement
Code for certain purchases made for SSA's disability programs. Specifically,
purchases made from one vendor were separated into multiple purchases to avoid
the State's bidding and contract requirements for procurements in excess of
$25,000 (Attachment A, pages 1 and 2). The corrective action plan indicated
that monitoring tools have been developed to track compliance with the Illinois
Procurement Codes (Attachment A, page 2).

We recommend SSA ensure DHS implemented procedures to ensure that procurements
are performed in accordance with the State's rules and regulations.

The single audit also disclosed the following findings that may impact DDS
operations although they were not specifically identified to SSA. I am bringing
these matters to your attention as they represent potentially serious service
delivery and financial control problems for the Agency.

Procedures were not adequate to ensure that financial information submitted
to the Office of the Comptroller was accurate and timely (Attachment B, pages
1 and 2).

Expenditures claimed were unreasonable and an unapproved cost allocation methodology
was used (Attachment B, pages 3, 4, and 5).

The cost allocation methodology was not amended to accurately allocate costs
to all applicable programs (Attachment B, pages 6 and 7).

Please send copies of the final Audit Clearance Document to Shannon Agee and
Rona Lawson. If you have any questions contact Shannon Agee at (816) 936 5590.

Patrick P. O'Carroll, Jr.

Overview of the Office of the Inspector General
The Office of the Inspector General (OIG) is comprised of our Office of Investigations
(OI), Office of Audit (OA), Office of the Chief Counsel to the Inspector General
(OCCIG), and Office of Resource Management (ORM). To ensure compliance with
policies and procedures, internal controls, and professional standards, we also
have a comprehensive Professional Responsibility and Quality Assurance program.

Office of Audit
OA conducts and/or supervises financial and performance audits of the Social
Security Administration's (SSA) programs and operations and makes recommendations
to ensure program objectives are achieved effectively and efficiently. Financial
audits assess whether SSA's financial statements fairly present SSA's financial
position, results of operations, and cash flow. Performance audits review the
economy, efficiency, and effectiveness of SSA's programs and operations. OA
also conducts short-term management and program evaluations and projects on
issues of concern to SSA, Congress, and the general public.

Office of Investigations
OI conducts and coordinates investigative activity related to fraud, waste,
abuse, and mismanagement in SSA programs and operations. This includes wrongdoing
by applicants, beneficiaries, contractors, third parties, or SSA employees performing
their official duties. This office serves as OIG liaison to the Department of
Justice on all matters relating to the investigations of SSA programs and personnel.
OI also conducts joint investigations with other Federal, State, and local law
enforcement agencies.

Office of the Chief Counsel to the Inspector General
OCCIG provides independent legal advice and counsel to the IG on various matters,
including statutes, regulations, legislation, and policy directives. OCCIG also
advises the IG on investigative procedures and techniques, as well as on legal
implications and conclusions to be drawn from audit and investigative material.
Finally, OCCIG administers the Civil Monetary Penalty program.

Office of Resource Management
ORM supports OIG by providing information resource management and systems security.
ORM also coordinates OIG's budget, procurement, telecommunications, facilities,
and human resources. In addition, ORM is the focal point for OIG's strategic
planning function and the development and implementation of performance measures
required by the Government Performance and Results Act of 1993.